Entrepreneurial Judgment, Decision Procedure and the Inevitable Emergence of the Non-optimizing Firm in a Capitalist Economy

It has been argued that understanding of entrepreneurship and firm behavior can be advanced by generalizing the static theory of the neoclassical firm so that it can deal with conditions in a dynamic economy. The paper rejects generalization and explains why such a shift causes the nature of the allocation process to change from the neoclassical pattern. Under generalization, critical information becomes prohibitively costly to obtain and entrepreneurial judgment rather than the Pareto rules decides allocation. Thus, the non-optimizing firm becomes dominant.